Capacity Development for the Clean Development …Clean Development Mechanism. Based on various...

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Capacity Development for the Clean Development Mechanism Lessons Learned in Ghana, India, Indonesia, South Africa and Tunisia

Transcript of Capacity Development for the Clean Development …Clean Development Mechanism. Based on various...

Page 1: Capacity Development for the Clean Development …Clean Development Mechanism. Based on various examples and in-depth discus-sions with colleagues, this study features practi- cal

Capacity Development for the Clean Development MechanismLessons Learned in Ghana, India, Indonesia, South Africa and Tunisia

Page 2: Capacity Development for the Clean Development …Clean Development Mechanism. Based on various examples and in-depth discus-sions with colleagues, this study features practi- cal

Impressum

EditorDeutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH

Climate Protection Programme in Developing Countries,Postfach 518065760 Eschborn / Germany T +49 61 96 79 – 1376F +49 61 96 79 – 801376I http://www.gtz.de/climate

ResponsibleAnja Wucke

AuthorsLambert Schneider, Katherina Grashof Öko-Institut e.V.Berlin

DesignAdditiv. Visuelle Kommunikation,Berlin

Photospixelio.de

Printed byW.B. Druckerei GmbHHochheim am Mein

Eschborn, October 2006

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S. 3 Foreword

S. 4 Executive Summary

S. 5 Introduction

S. 8 Country Analysis

S. 28 Lessons Learned

S. 36 Annex I Sustainability Criteria in Detail

S. 40 Annex II Contact Details of the Designated National Authorities

C o n t e n t s

S. 41 Abbreviations

G h a n a

I n d i a

I n d o n e s i a

S o u t h A f r i c a

T u n i s i a

S. 8

S. 12

S. 16

S. 20

S. 24

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A c k n o w l e d g e m e n t s

The authors, Lambert Schneider and Katherina Grashof (Öko-Institut e.V.), deserve particular rec- ognition for preparing this study based on a wide range of different documents, actors and experiences, which would have been impossible without their hands-on-experience in capacity development in developing countries.

Special thanks are due to the representatives of the Designated National Authorities, William Kojo Agyemang-Bonsu (Ghana), Rajesh Kumar Sethi (India), Masnellyarti Hilman (Indonesia), Lwazikazi Tyani (South Africa) and Imed Fadhel (Tunisia), for providing invaluable information and insights.

On behalf of GTZ I would like to take this oppor- tunity to express our gratitude for excellent work to the international experts involved in CDM capac-ity development activities and for their comments on earlier version of this paper, in particular Axel Michaelowa and Mathias Krey (Perspectives), Stefan Raubenheimer (SouthSouthNorth), Urs Brodmann (Factor Consulting), Ralph Harthan (Öko-Institut Berlin) and Oliver Karkoschka.

Finally, I would like to thank my GTZ colleagues for the support they gave to this paper, especially Lorenz Petersen (Germany), Pamposh Bhat (India), Birgit Kaminski (Indonesia), Valeria Troudi and Jörg Linke (Tunisia).

Anja Wucke, GTZ

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Capacity Development means efforts to strength-en the ability of individuals, organisations and societies to put sustainable development strategies into practice. Capacity development is a key factor in successful change processes holding a prominent position both on the international and German development agenda.

With this study we are presenting lessons learned in capacity development for Climate Change and the Clean Development Mechanism. Sup-porting developing countries in getting access to international carbon markets has been a priority area of the Ministry for Economic Cooperation and Development.

By helping developing country partners cope with the institutional challenges and technical comple-xities of the CDM we aim to support the success-ful implementation of the United Nations Frame-work Convention on Climate Change (UNFCCC) and its Kyoto Protocol. With our support we want to enable developing country partners to benefi t from resource mobilisation through the Clean Development Mechanism.

Based on various examples and in-depth discus-sions with colleagues, this study features practi- cal applicability. I trust it will contribute to more widespread application of the Clean Development Mechanism in Developing countries.

F o r e w o r d

Marita Steinke,

Head of Division Environment and Sustainable Use of Natural Ressources,

Federal Ministry for Economic Cooperation and Development

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German Technical Cooperation has supported both the establishment and day-to-day business of Designated National Authorities (DNAs) for the Clean Development Mechanism (CDM) in Ghana, India, Indonesia, South Africa and Tunisia. Joint capacity development activities together with our in-country partners reached out to the public as well as the private sector. This report provides an overview of the process of establishing DNAs and promotion of the CDM in these five countries and summarises practical experiences and lessons learned from the capacity building activities.

The establishment and proper functioning of a DNA is a key prerequisite for participation in the CDM and is still a barrier to project development in some countries. To establish a DNA, a unit within a government organisation needs to be des-ignated, procedures and sustainability criteria for the assessment of proposed CDM projects need to be established, and the source of financing for the DNA needs to be clarified. Based on the experi-ences made in the five countries, we recommend that the following lessons learned be considered:

Ensure broad participation of stakeholders and a common understanding of the CDM and the role of the DNA by all stakeholders. Find a reputa-ble organization to co-ordinate this process.

Designate an existing organization as the DNA. The DNA should include an interministerial “DNA committee” responsible for final decision-making and an “operational unit” conducting day-to-day activities, including project evaluation.

Approval procedures should be transparent and easy-to-understand to enhance the predictability of the outcome of the assessment. Provide project developers with the opportunity to put forward a preliminary project submission, to present their project verbally at DNA meetings and to appeal against decisions by the DNA.

Sustainability criteria should be based on criteria that already exist in-country. It is helpful to cat-

egorise the criteria into environmental, social and economic aspects and to operationalise their assess-ment by means of indicators which allow for an objective evaluation, possibly using a scoring sys-tem. Testing the approval procedures and sustain-ability criteria against real projects before adopting them officially has proven helpful.

With regard to CDM promotion, sectors with a considerable emission reduction and replication potential ought to be identified first. Especially when financial resources are scarce, it is advisable to focus promotion activities on specified needs. Workshops which target important persons and organisations of the chosen sectors should include a thorough explanation of the advantages, rules and concepts of the CDM.

Only after there is a basic understanding of the CDM promotion activities can turn to support-

ing the identification of concrete projects and facilitating the development of project proposals in very practical terms. Training activities specifically designed for project developers and CDM con-sultants can significantly increase the in-country capacity for project development and thus lower transaction costs. Typically, these workshops in-clude the in-depth discussion of project proposals, the estimated emission reductions they are to bring about, methodological challenges and the chances of them being positively assessed by the DNA, validated and registered. Having successful project developers share their experiences, combined with a participatory approach and built upon the knowledge and experiences of the participants will go a long way towards making the CDM work for developing countries.

E x e c u t i v e S u m m a r y

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The Clean Development Mechanism (CDM) is a fl exible mechanism under the Kyoto Protocol with two objectives: The CDM shall help developing countries in achieving sustainable development and assist industrialised countries in reducing the costs of meeting their emission reduction targets. Under the CDM, emission reduction projects are undertaken in developing countries, with often lower greenhouse gas abatement costs than in in-dustrialised countries. For each ton of CO2 equiva-lent that is reduced as a result of a CDM project, a certifi ed emission reduction unit (CER) is issued and can be used by industrialised countries for the fulfi llment of their commitments.

All countries wishing to participate in the CDM have to set up a so-called Designated National Authority for the CDM (DNA). The main task of the DNAs in developing countries is to evalu-ate proposed CDM projects and to issue letters of approval confi rming that the project activity is implemented voluntarily and contributes to sus-tainable development in the host country. Where environmental impacts of the project are deemed to be signifi cant, an environmental impact assess-ment may also be required. CDM projects can only be registered if the host country has ratifi ed the Kyoto Protocol and approved the project – and if the project has been validated by a Designated Operational Entity (DOE) accredited by the CDM Executive Board.

In some countries, the DNA also promotes the development of CDM projects, e.g. by undertak-

ing capacity building measures, compiling useful information for project proponents or potential buyers of CERs or by holding workshops to raise awareness about the CDM.

The German Technical Cooperation has supported the establishment and work of DNAs in Ghana, India, Indonesia, South Africa and Tunisia. Fur-thermore, several capacity building activities have been carried out to promote the CDM in the pri-vate and public sector.

This report summarises the experiences and lessons learned from the establishment of DNAs and the promotion of the CDM in these fi ve countries. These experiences may prove useful when similar measures in other countries are being implement-ed. The process of establishing a DNA is in differ-ent stages of development in the fi ve countries. For some countries the focus of this report is on the process of institutional setup, while for other coun-tries aspects, such as the application of the sus-tainability criteria, receive more attention.Table 1 provides an overview on the arrangements for the DNA in the fi ve countries. In all countries, a division of a ministry serves as DNA secretariat. The DNAs examined in this report are hosted by the Ministries for the Environment, with the ex-ception of South Africa. In all countries, the ulti-mate decision on project approval lies with or is recommended by an interministerial committee.

The table further shows that the DNAs in the analysed countries are not only responsible for

I n t r o d u c t i o n

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project approval, but also for the promotion of the CDM in their countries. In most cases, the CDM is promoted by organising workshops for potential project developers, with the aim of raising aware-ness of the advantages, procedures and require-ments of implementing CDM projects.

Project evaluation by the DNA is undertaken in different ways: some countries have set up a tech-nical team, which assesses the projects’ contribu-tion to sustainable development but does not have the right to decide on approval. In other cases, the members of the interministerial committee evaluate the projects themselves, or the secretariat assisting the committee carries out the assessment, which then serves as the basis for the committee’s decision.

Two of the analysed countries offer the opportu-nity for a Project Idea Note (PIN) to be submitted, which permits a preliminary project assessment at an early stage of project development. In Tuni-sia, the submission of a PIN is expected to be man-datory. India and Indonesia require that a Project Design Document (PDD) and supplementary

information be submitted immediately. Most of the DNAs publish the submitted PDDs on their website or plan to do this, so that interested stake-holders can view them and submit their comments. The maximum duration of the approval procedure is between six and eleven weeks; however, the country description will show that often the evalu-ation is completed ahead of schedule. The follow-ing section describes for each country the capacity

building activities that have been undertaken, the fi rst practical experiences made, the institutional arrangements for the DNA, the procedures for project approval and the criteria to assess whether a project contributes to sustainable development. Based on this information, we summarise our les-sons learned and experiences from the activities in these fi ve countries in the next section. Here, key issues in the course of DNA establishment are identifi ed and common practices are illustrated. The Annex assembles a detailed overview of the sustainability criteria adopted by the fi ve countries, as well as the contact addresses of the DNAs.

Overview on the arrangements

of the Designated National Authorities

I n t r o d u c t i o n

1 In the case of Ghana and Tunisia, the regulations for CDM host country approval have not yet been offi cially adopted. Some of the information provided here is of a provisional nature.

Table 1

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G h a n a 1 I n d i a I n d o n e s i a S o u t h A f r i c a T u n i s i a 1

Functions

of the DNA

Ministry

hosting the

DNA

Institutional

arrangements

and decision

making

Preliminary

assessment

by the DNA

No. of

approved

projects

Max.

duration of

evaluation

Public

consultation

Governing Council for the DNA (representing 5 gov. institutions) or ad hoc committee decides on approval, supported by a secretariat at the MES

National CDM Authority (representing 8 gov. institutions) decides on project approval, supported by a secretariat at the MoEF

National Commission for CDM (representing 9 ministries) decides on approval, supported by a secretariat and a technical team.

Advisory Committee (representing 8 ministries) comments on proposed projects; the fi nal decision lies with the DME

Committee representing 15 gov. institutions and stakeholders evaluates projects and decides on approval

Project approval, promotion

Project approval, provision of infor-mation, promotion

Project approval, promotion

Project approval, promotion

Project approval, promotion

Ministry of Environment and Science (MES)

Ministry of Environment and Forest (MoEF)

Ministry of Environment

National Department of Minerals and Energy (DME)

Ministre de l‘Environnement et du Développement Durable (MEDD)

Voluntary PIN assessment

No PIN assessment No PIN assessment Voluntary PIN assessment

Mandatory PIN assessment

Planned: PDD publication on DNA’s homepage and announcement of the project in 2 national newspapers

No specifi c provision, public consultation is assumed to occur as part of validation

Publication of PDDs on DNA’s homepage, submission of comments from the public is possible

Publication of PDDs on DNA’s homepage, submission of comments from the public is possible

No provisions yet

PIN assessment: 14 days

PDD approval: 61 days

PDD approval: 60 days

PDD approval: 77 days

PIN assessment: 42 days

PDD approval: 63 days

PIN assessment: 15 days

PDD approval: 45 days

None Almost 400 7 15 2

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The process of DNA establishment and CDM promotion

Ghana ratifi ed the Kyoto Protocol in May 2003. The

Environmental Protection Agency (EPA) of the coun-

try has substantially promoted the establishment of the

DNA within the country.

S t e p w i s e s e t - u p o f t h e i n s t i t u -

t i o n a l a r r a n g e m e n t s

Ghana had initially planned to establish a new institution, the Climate Change Commission, to host the DNA. It was proposed that this new institution should have broad responsibilities on climate change in general. For this purpose, draft legislation was prepared in 2004 and discussed with experts of the German Technical Coopera-tion. A workshop on the process of establishing the DNA, which was supported by the German Technical Cooperation and managed by the EPA, followed in August 2005. Its target group were members of parliament who showed great interest in climate change issues and institution building in Ghana. In September 2005, the DNA of Ghana was set up within the EPA, as discussions on the establishment of the Climate Change Com-mission had not reached a conclusion. By October 2006, the draft legislation for making the DNA operational had not yet been passed in parliament.

At the moment, the DNA in Ghana is working on

the basis of ministerial declarations. CDM project evaluation is being carried out by ad hoc expert groups who make recommendations to the CDM Governing Council, which is entitled to take the fi nal approval decision.

C a p a c i t y b u i l d i n g f o r t h e

i n d u s t r y

A capacity building workshop for industry repre-sentatives was held with the support of the German Technical Cooperation. It included face-to-face discussions and a technical training workshop with decision-makers of companies in the energy, manu-facturing, metal, cement, oil and textile industry. The aim of the workshop was to support the private sector in evaluating their CDM potential realistically and in drafting PDDs on the basis of existing baseline and monitoring methodologies. A number of promising CDM project types for Ghana were identifi ed, including:

methane capture from waste waters (industrial and other biomass waste)

fuel oil consumption reduction by means of waste heat recovery

industrial boiler effi ciency improvements

However, a major barrier to implementation of such projects turned out to be the lack of approved methodologies for these project types. The work-

shop also revealed that many companies were not

G h a n a

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aware that the realisation of CDM projects and the income from the generated CERs might render certain activities profi table which could not be implemented economically without the CDM.

Practical experiences with CDM implementation

No projects have as yet been approved by the DNA in

Ghana. The DNA has received four project propos-

als in the sectors of energy effi ciency, afforestation/

reforestation and waste – including one for program-

matic CDM –, for which it has already issued letters

of no objection. Once methodologies for these project

types have been approved by the CDM Executive

Board, the DNA will complete the evaluation of these

projects. The DNA also expects further renewable en-

ergy projects, including biomass and biofuels, as well

as afforestation/reforestation projects to be developed,

which are attracting more and more interest amongst

investors.

C D M p r o j e c t p i p e l i n e

A larger project under development is the up- grade of a 220 MW power plant to a combined cycle plant. A methodology for this type of project activity has been approved by the CDM Executive Board. It is expected that the project will lead to an emission reduction of about 600,000 tonnes of CO2 per year. An air conditioning project de-veloped by the Energy Foundation of Ghana and QualityTonnes aims to ensure that a mandatory effi ciency standard is enforced, as the country itself does not have the fi nancial means necessary for compliance control and enforcement of the regulation. The revenues from the project are planned to be used for testing the effi ciency of equipment being sold, developing an effi ciency label so as to inform customers, carrying out in-formation activities for retailers, etc. However, it is not yet clear whether this project will be eligi-ble for crediting under the CDM, given that COP/MOP1 decided that “programmes of activi-ties” are eligibile, but that “policies and standards” are not eligible and an interpretation of the COP/MOP guidance by the CDM Executive Board is still pending.

As a result of the capacity building activities of the German Technical Cooperation, an energy effi cien-cy project involving the replacement of incandes-cent light bulbs in private housholds by compact fl uorescent lamps was initiated as a joint project of

G h a n a

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the Energy Foundation Ghana, Perspectives and OSRAM. The methodology for the project is currently being evaluated by the CDM Methodol-ogy Panel. Another project stemming from a ca-pacity building mission plans to reduce emissions from industrial water from palm oil processing plants.

B a r r i e r s t o C D M p r o j e c t

d e v e l o p m e n t

Due to its small size, the palm oil processing project encountered diffi culties in fi nancing the development of the project - a recurring diffi culty for many projects according to the DNA. Private capital is diffi cult to obtain, especially for rather small CDM projects, which do not generate a large volume of CERs. For example, a biomass combined heat and power project had been plan-ned in Kumasi, where the local project benefi ci-aries - small industries - were set to provide the initial fi nancing; however, they did not decide in favour of it in the end. The DNA states that even if companies are interested in setting up CDM projects, their capacity to develop PDDs needs to be strengthened. The Dutch-funded NGO SouthSouthNorth is of the view that one or two demonstration projects ought to be implemented so as to convince the Ghanian industry that CDM offers real economic benefi ts. Currently, it plans to produce an investors’ guide on the CDM in Gha-na, which also aims to address barriers to project development and to identify ways in which they can be overcome.

With regard to the low participation of sub-Saha-ran countries in the CDM, the World Bank’s Community Development Carbon Fund, UNEP’s Division of Technology, Industry and Economics and the UNEP Risø Centre have started a project on “Carbon Finance for Sustainable Energy in Africa”. The one-year project is designed to foster the local capacity of public and private sectors in fi ve countries, including Ghana, in identifying, developing and implementing CDM projects.

Responsibilities, institutional structure and DNA decision making

The DNA is currently hosted by the EPA, which is a

subordinate body to the Ministry of Environment and

Science (MES). A Governing Council of the DNA

has been set up to evaluate proposed CDM projects;

its members consist of the chief directors of four

ministries (Environment & Science, Energy, Lands,

Forestry & Mines, Trade & Industry) and the director

of the External Resource Mobilization Division of the

Ministry of Finance & Economic Planning. If a

meeting of the Governing Council for project evalu-

ation is not possible “due to time constraints” 2 of the

high-level offi cials, the DNA may convene an “ap-

propriately formed” Ad Hoc Technical Committee of

the Council.

Funding for the DNA shall come from different

sources: according to the draft legislation, for each

project approval, a fee which “shall not exceed

$5,000” can be levied; but funds are also to come

from the budget of the MES or from “donations […]

from any source” received by a public institution on

behalf of the DNA.

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C D M p r o j e c t a p p r o v a l p r o c e d u r e

According to the draft legislation, the project ap-proval procedure should comprise the following steps:

Voluntary submission of a Project Identifi cation Note (PIN);

The PIN is evaluated by the DNA within two weeks;

For the offi cial application, proponents should submit a PDD, including detailed explanations as to why the project fulfi ls the sustainability criteria (not necessary if environmental impact assessment (EIA) is required);

The proponent holds a presentation at a meet-ing of the Governing Council;

The Governing Council or an Ad Hoc Commit-tee evaluates the project and – within 61 days of the initial submission – decides on approval;

Project proponents can appeal against a negative decision before the Minister of the MES.

For the host country approval to be granted, the methodologies used by a project need to be ap-proved by the CDM Executive Board; however, the DNA’s evaluation can begin prior to this. Validation by the DOE can also take place in par-allel. A publication of the submitted PDDs on the DNA’s website and an announcement in two national newspapers is planned so as to provide the public with the opportunity to submit com-ments during the evaluation. But this has not hap-pened yet.

S u s t a i n a b i l i t y c r i t e r i a a n d

a s s e s s m e n t

According to the draft legislation, Ghana follows a two-step approach to assess the contribution of a proposed CDM project to sustainable de-velopment. In a fi rst step, it is assessed whether the project is not expected to lead to signifi cant

environmental degradation, loss of livelihood or damage to the national economy. If this fi rst cur-sory evaluation shows that these three requirements are fulfi lled, a more detailed assessment is to be undertaken in a second step. Here, the assessment of economic sustainability includes, for example, the project’s impact on foreign direct investment, energy costs or technology transfer. Social criteria concern the level of employment, the development of previously underdeveloped areas, etc. Environ-mental aspects include compliance with national environmental regulations on the one hand and impacts on biodiversity, ecosystems, waste, air quality and the environmental rights of citizens on the other. However, those environmental rights have not been further specifi ed, yet. The DNA determines whether the project fulfi ls the criteria on balance, so that projects leading to negative impacts with regard to certain aspects can still be approved if their positive impact on other aspects is expected to be considerable. For afforestation and reforestation project activities, Ghana has de-termined a single minimum tree crown cover value of 30 per cent, a single minimum land area of one hectare and a single minimum tree height of fi ve metres.

2 These and the following quotations are taken from the draft law on DNA regulations.

G h a n a

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The process of DNA establishment and CDM promotion

After having ratifi ed the Kyoto Protocol in August

2002, the Government of India set up a National

CDM Authority (NCDMA) as the DNA in late

2003 within the Ministry of Environment and For-

ests (MoEF). However, CDM projects were already

being approved before then by an interministerial

ad hoc committee which was originally set up to ap-

prove projects under activities implemented jointly

(AIJ).3 The interest in the CDM was signifi cantly

fostered by CER tenders in Annex I countries and

an early US capacity building programme in 1999.

The German Technical Cooperation has continu-

ously supported Indian institutions and corporations

in tapping the CDM potential, including the DNA,

the Ministry of Power, the Central Electricity Author-

ity, the Bureau of Energy Effi ciency, the National

Thermal Power Corporation, the National Hydro

Power Corporation, the Ministry of Steel and the Steel

Authority of India. Furthermore, capacity building in

the private sector has been strongly supported.

S u p p o r t f o r t h e I n d i a n D N A

“GTZ CDM-India” was established as the capac-ity building facility under the Indo-German En-

ergy Programme (IGEN) in 2003, which is being

jointly implemented by the Governments of Ger-many and India. A ‘Technical Cell’ in the Climate Change Division of the MoEF was established to provide research and technical support to process the host country approval of CDM projects. The technical cell is supported by well-reputed inter-national and national experts whenever the need arises. The objective is to foster high-quality and widely replicable CDM projects in the public and private sector, to gain experience via learning-by-doing and enhance the projects’ chances of being successfully registered by the CDM Executive Board.

C a p a c i t y b u i l d i n g a c t i v i t i e s f o r

t h e p r i v a t e s e c t o r

During the fi rst years, the German Technical Co-operation provided free advisory services to the private sector, such as the pre-evaluation of CDM project proposals and the preparation of PDDs and the development of new methodologies. Vari-ous capacity building workshops were conducted. About 4000 entrepreneurs were trained to identify promising CDM projects and about 150 consult-ants were trained to design them. Energy-intensive sectors were covered, such as power, cement, iron and steel, petrochemical, metal, pulp and paper and chlor alkali. As a result, at least 30 CDM projects were initiated. The training enabled several Indian consultants to acquire key CDM knowl-

edge. Moreover, two in-house workshops at one

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of the largest private companies in India, Reliance Industries, mobilised a CDM pipeline of several dozen projects which are all developed in-house. Also, chambers of commerce and industry associa-tions were supported by the staff of the Indian DNA and experts of the German Technical Coop-eration in developing the carbon market in India and in acting as multiplicators in the promotion of CDM.

S p e c i a l f o c u s o n t h e e n e r g y s e c t o r

The Indian branch of the German Technical Co-operation is the appointed CDM advisor of the National Thermal Power Corporation (NTPC), India’s largest power utility, for the preparation of two important and challenging methodologies, addressing the renovation and modernisation of existing coal-fi red power plants and the construc-tion of new, highly effi cient (supercritical) power plants. The Indian branch of the German Techni-cal Cooperation also brought together regulators and company representatives to discuss the CER revenue sharing.

Furthermore, the project supported the German KfW Banking Group (German Financial Coopera-tion) and its local partner, the Rural Electrifi cation Corporation (REC), in implementing the decision that all new projects to upgrade or expand distri-bution networks in rural areas be scrutinised for CDM benefi ts.

Another result of the capacity building activities is the preparation and publication of national baseline CO2 emissions data for the Indian power sector in cooperation with the Central Electricity Authority. This tool provides ready-to-use data for CDM projects displacing grid electricity and associated CO2 emissions (e.g. grid-connected renewable energy projects and energy effi ciency projects reducing the consumption of grid elec-tricity). The database is consistent with existing CDM methodologies. It will be updated annually to incorporate the latest data on the Indian power grid as well as new methodological developments. Furthermore, power tariff regulations were modi-fi ed to allow CDM projects in the power sector to retain revenues from CDM projects. In the past, some state electricity regulatory commissions had required a reduction of the electricity tariff if the costs for electricity generation were decreased due to the CDM.

Practical experiences with CDM imple-mentation

India has evolved into a major CDM host country.

By October 2006, the Indian DNA had approved

3 Projects under Activities Implemented Jointly (AIJ) are emission reduction projects undertaken under the Convention. AIJ projects started already during the 90ies but emission reductions can not be used under the Kyoto Protocol.

I n d i a

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391 CDM projects – more than any other country –,

which are estimated to generate around 300 million

CERs until 2012. More than half of them are renew-

able energy or energy effi ciency projects. Activities

which reduce emissions of industrial gases account for

approximately another quarter.

By October 2006, UNEP/Risø’s CDM pipeline re-

ported that 114 projects had been registered by the

CDM Executive Board, 29 were awaiting registra-

tion, 313 were in the validation stage, and three had

been rejected by the CDM Executive Board. Moreo-

ver, India still claims the lead over China in Point

Carbon’s rating of countries’ attractiveness in terms of

CDM investments (Point Carbon CDM & JI Moni-

tor, 12 July 2006). Some of the proposed projects are

sent back to the proponent by the DNA because of

incomplete information or because they did not fulfi l

the sustainability criteria. According to the DNA, in

most cases the documents are then revised by the pro-

ponent, resubmitted and then approval can be grant-

ed. In frequently issuing approvals within one or two

months after project submission, the DNA generally

decides fast. Criticism had been aired by NGOs that

the DNA is not assessing the sustainability impact of

proposed projects with suffi cient thoroughness.

B a r r i e r s t o t h e d e v e l o p m e n t o f

C D M p r o j e c t s

The DNA perceives the unclear future of the CDM beyond 2012 as an important barrier to the development of more CDM projects in India. Ac-cording to the German Technical Cooperation in India, the fi nancing of bilateral projects is still a major issue hindering a more robust development of the CDM in India. Often minimal awareness of the CDM among potential stakeholders, such as large public sector undertakings (state-owned en-terprises) and small and medium-sized enterprises, constitutes another barrier. However, according to Perspectives, the costs for preparing PINs and PDDs are lower in India than in any other coun-

try. The German Technical Cooperation facilitates potential project development by recommending experienced Indian consultants on its Indian web-site; it has also developed and maintains two web-sites, one of them is the offi cial MoEF website.4

C o n t r o v e r s i e s w i t h r e g a r d t o

s e v e r a l p r o j e c t s

Some Indian CDM projects - like the Bhilangana hydro power project in the northern state of Ut-taranchal - encountered major opposition from the local population as well as from environmental NGOs. These stakeholders claim to have not been suffi ciently consulted and request that the projects in question should not be validated due to negative impacts on the environment or the additionality not being fulfi lled. Point Carbon reported that the quality of some Indian CDM projects had been called into question by potential investors and project participants, arguing that host country ap-proval had been given to projects which clearly did not contribute to sustainable development (Point Carbon CDM & JI Monitors, 10 January and 28 June 2006). Likewise, a CER tender for hydro power plants by the Asian Development Bank (ADB) has led to substantial NGO opposi-tion as stakeholder participation is said to have been defi cient. In fact, there seems to be a recur-ring problem as regards some project developers trying to present approval from the local authori-ties as suffi cient stakeholder consultation, although often no open meeting with stakeholders had taken place (GTZ CDM Highlights, 37 June 2006).

Responsibilities, institutional structure and DNA decision making

The interministerial DNA committee, the NCDMA,

is hosted by the MoEF and headed by the Secretary

to the Ministry. The MoEF’s Climate Change Direc-

tor serves as the Member Secretary of the DNA. The

other seven members are representatives of the Foreign,

Finance and Industrial Policy and Promotion Secre-

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I n d i aI n d i a

taries, of the Ministries of Non-Conventional Energy

Sources and Power, of the Secretary of the Planning

Commission and the Joint Secretary of Climate

Change in the MoEF. Alongside project evaluation,

the NCDMA supports the generation of sector-specifi c

baseline data and presents Indian projects at trade

expositions.

Day-to-day activities like constituting and coordinat-

ing committees or sub-groups to examine the proposals

are carried out by the DNA’s Member Secretary. Cur-

rently, the MoEF covers the entire costs of the DNA

and no fees are charged for project approval or other

services. Similarly, the government of India does not

levy a tax on CERs, but may do so in the future once

the CDM market has developed further. On a sub-

national level, there is some discussion on future taxa-

tion of CERs, which has not yet reached a conclusion.

Approval for a CDM project from the DNA can also

be requested if the project uses a baseline and moni-

toring methodology still in development; however,

approved methodologies are preferred by the DNA.

Validation by the DOE can be carried out in parallel

to host country approval.

P r o j e c t a p p r o v a l p r o c e d u r e

For the application, the submission of a PDD and a so-called Project Concept Note (PCN), the coun-try-specifi c application form, is mandatory; there is no preliminary project review. Furthermore, a clearance of the pollution control board of the In-dian state hosting the project needs to be submit-ted; environmental impact assessments also have to be carried out in advance. Since the start of the Indian DNA in 2003, the approval procedures and criteria have remained unchanged and no revision is deemed necessary by the DNA either.

Submitted applications are circulated to all NCDMA members for comments and evalua-tion. A meeting of the NCDMA is held once a month, where the project proponents give a brief presentation and unresolved queries and issues are

clarifi ed. If the NCDMA members have no ad-ditional queries and are satisfi ed with the project, the host country approval shall be issued within 60 days. Should the NCDMA members have further enquiries, additional information can be requested from the project proponents. In some exceptional cases, approval was granted on a preliminary basis for a limited period during which the project pro-ponent is required to submit missing information or documents (e.g. the approval of a local forestry authority). If the proponent fails to comply within this period, approval is withdrawn again.

S u s t a i n a b i l i t y c r i t e r i a

The sustainability assessment comprises indica-tors regarding the following aspects: Social criteria refer to the alleviation of poverty by generating additional employment opportunities, or a reduc-tion in social disparities. Economic criteria mainly focus on additional investment. Environmental criteria concern the project’s impact on natural re-sources, biodiversity, human health and pollution; technological criteria focus on the development, deployment, diffusion and/or transfer of modern technologies.

In addition to the contribution of the project to sustainability objectives, the NCDMA assesses the probability of successful project implementa-tion. The NCDMA also assures that CERs are not purchased from offi cial development assistance (ODA).

For afforestation and reforestation project activi-ties, India has determined a single minimum tree crown cover value of 30 per cent, a single mini-mum land area of 0.05 hectares and a single mini-mum tree height of fi ve metres.

4 www.cdmindia.com and www.cdmindia.nic.in

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The process of DNA establishment and CDM promotion

The Indonesian DNA was offi cially set up in June

2005 with the assistance of the German Techni-

cal Cooperation. In 2000 and 2001, a National

Strategy Study (NSS) on the CDM was carried out

to prepare Indonesia for participation in the CDM.

The NSS was partly supported by the German

Technical Cooperation. As an important consequence

of this work, the interest of the Indonesian govern-

ment in the CDM was awakened and a regulation

on the establishment of the DNA was drafted in

2003. Indonesia did not, however, ratify the Kyoto

Protocol - a necessary precondition of the country’s

participation in the CDM - until June 2004. After

ratifi cation, it still took more than a year for the

formal decision on the DNA regulation to be signed

by the Minister of Environment. This indicates that

there was substantial debate on the establishment of

the DNA.

C D M i n s t i t u t i o n b u i l d i n g

For the purpose of establishing the DNA, CDM institution-building activities were carried out once the NSS had been completed. These activities were conducted by Pelangi, an Indonesian policy research organisation, on behalf of the German Technical Cooperation. As in many other coun-

tries, it took some time before suffi cient political support for the CDM was gathered from some of the governmental institutions. Identifying individuals within the government who were pre-pared to actively support the implementation of CDM turned out to be crucial, especially since support from the private sector was initially rela-tively low. When the establishment of the DNA fi nally made it on to the governmental agenda, substantial debate on sustainability criteria was taking place within the ministries. Several inter-ministerial meetings and workshops were held within the course of a year with the aim of deter-mining a set of national sustainable development criteria approved by all ministries involved. The private sector, university and NGO representatives were also consulted. Before the DNA was offi cially launched, the approval procedure was tested dur- ing a workshop in order to assess whether the func-tions and tasks of the DNA and its organs were suitably designed.

To promote the development of CDM projects, a CDM training event was organised by the German Technical Cooperation to increase the capacity of potential consultants in preparing PDDs and in applying the criteria and indicators for national approval by the DNA. The German Technical Cooperation is also assisting the DNA as part of the Indonesian-German Environmental Programme by providing consultancy services to the DNA.

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Practical experiences with CDM imple-mentation

By the end of October 2006, eight CDM projects had

been approved by the DNA. The PDDs and approval

letters for these projects have, for the most part, been

published on the DNA’s website. Up to now, no CDM

project proposals have been ultimately rejected in

Indonesia. Since the beginning of 2006, the DNA has

received eight new project applications, half of which

need to be supplemented by additional information

before the evaluation process can begin.

B a r r i e r s t o C D M p r o j e c t d e v e l o p -

m e n t

According to the DNA, the barriers to CDM project development include a lack of awareness about the advantages of the CDM and a lack of recognition of climate change as an important issue. Moreover, the DNA views that project de-velopers require additional support in identifying CDM projects within their operational activities and in covering the transaction costs for project development. The fact that most of the commu-nication on the CDM takes place in English has not caused any major problems so far, given that the current projects are rather large and have often been developed with international partners. How-ever, it may turn out to be problematic for smaller projects developed by small and medium-sized

enterprises. The translation of methodologies into Indonesian would be helpful in this respect, but the DNA does not, unfortunately, have suffi cient resources for this at present.

S t r a t e g i c C a p a c i t y B u i l d i n g

Under a private public partnerships programme (PPP) supported by the German Technical Coop-eration, Perspectives and Pelangi are undertaking CDM capacity building activities in Indonesia. These included a series of workshops for compa-nies from the power, forestry and agriculture sec-tors which aimed to raise the awareness of CDM. At least three professional consulting fi rms were founded in Indonesia as a result of this project, which provide CDM-related services, such as the development of PDDs. A telephone marketing mission which targeted plant operators covered by the EU emissions trading system was conducted. Discussions with potential CER buyers and project developers from all over the world took place in the course of several carbon expositions. These activi-ties aimed to increase awareness within the CDM community about the Indonesian CDM market and the in-country service providers. A bilingual (Indonesian and English) CDM website was cre-ated.5

5 http://ppp.cdm.or.id/

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C D M p r o j e c t p o t e n t i a l

Having been in operation for a year, the DNA observed that a network of representatives from NGOs, universities, private companies, develop-ment agencies, international research institutions and governments of Annex I and Non-Annex I countries has evolved to support the CDM in Indonesia. According to the New Energy and In-dustrial Technology Development Organization (NEDO)6 based in Japan, there is signifi cant inter-est in biomass and biogas to electricity projects. Municipal waste treatment, biofuels and geother-mal projects also have great potential, the latter especially with regard to the volume of CERs. The production of biofuels from palm oil planta-tions under the CDM has recently raised concerns by NGOs, since such projects are considered to be one of the drivers for the destruction of Indonesia’s forests and peatlands, resulting in considerable emissions of carbon dioxide. For renewable elec-tricity projects, NEDO perceives a need for more reliable framework conditions, e.g. with regard to rules for grid access. Overall, NEDO expects Indonesia to have the capacity to host two percent of the global CDM project volume.7

Responsibilities, institutional structure and DNA decision making

Indonesia has set up a National Commission for

CDM (NCCDM) as the Designated National Au-

thority by decree of the Minister of Environment. The

NCCDM comprises nine members who represent the

higher ranks of nine ministries.8 A secretariat located

within the Ministry of Environment supports the NC-

CDM. A technical team, consisting of representatives

from the nine ministries assembled in the NCCDM

and one NGO representative, undertakes the evalua-

tion of the proposed projects. For this purpose, experts

assigned by the NCCDM can be asked for comments.

A stakeholder meeting can be convened to discuss con-

tentious projects; as of yet this has not been regarded

as necessary.

For transparency reasons and to support project de-

velopers in fi nding investors or CER buyers for their

projects, the DNA publishes potential projects, includ-

ing participant contact information, on its homepage.

Any interested person can submit a potential project

in the form of a PIN or in less elaborate form to the

DNA secretariat. If it is found to be reasonably fea-

sible, it is published in the list of potential projects.

In general, DNA funding comes from the Indonesian

government.

A p p r o v a l p r o c e d u r e

Indonesia has a one-step approval procedure, which comprises the following stages:

Project proponents submit a PDD, accompa-nied by an EIA report if required9

The secretariat publishes project submissions on the NCCDM website. Comments from stakehold-ers can be submitted via the website

In the course of 21 days, each technical team member evaluates the project and submits his or her evaluation report

The NCCDM meets and decides on fi nal ap-proval or rejection, at the latest 77 days after sub-mission by project proponents, unless revisions are deemed necessary

The project proponent may appeal against the

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decision of the DNA pursuant to general adminis-trative law.

It is not necessary for a project to have already been validated by a DOE when it is submitted to the DNA. No fees are levied on project proponents.

S u s t a i n a b i l i t y c r i t e r i a a n d s c o r -

i n g s y s t e m f o r i n d i c a t o r s

Indonesia has established four categories of sustain-ability criteria for project evaluation: environmen-tal, economic, social and technological criteria.10 While the fi rst three categories shall be assessed for the project region only, technological evaluation is undertaken on a national level. In order to evaluate the four criteria, 17 indicators have to be assessed separately.

Environmental criteria focus on the conservation of ecological functions and biodiversity, health protection and compliance with environmental, health and safety regulation and regional planning. Economic criteria refer to the preservation of the local community’s income, public service and em-ployment level. Participation of the local commu-nity is key to the social criteria. Another is to avoid confl icts among communities. The technological criteria concern the avoidance of experimental or outdated technologies and of technological de-pendence on the know-how of foreign parties.

In the NCCDM’s project application form, the proponent is required to justify in detail how the sustainability criteria are fulfi lled. Fulfi lment of the sustainability indicators is rated from 1 to 5. The overall score of the project has to be at least 3.5 on average. With regard to this rating procedure, an update of the DNA’s website is needed. Many sus-tainability indicators are formulated using negative expressions (e.g. “not imposing any health risk”), so that projects can be approved which do not, as a minimum requirement, diminish the status quo.

The Indonesian DNA states that it is satisfi ed with its approval procedure and that no changes are

foreseen in the approval framework. However, the DNA is considering the addition of a set of special sustainability indicators adapted to specifi c project types in order to facilitate and standardise the ap-proval requirements for these projects.

The minimum values for forestry projects in Indo-nesia are 0.25 ha for the area coverage, the crown cover of the area should be at least 30 per cent and the tree height at least 5 metres.

6 NEDO has supported a great number of CDM feasibility studies in many countries and set up a branch offi ce in Jakarta in 2000. NEDO is also active as a sponsor, cooperation partner and organiser of conferences and training seminars.

7 NEDO 2006: CDM Development in Indonesia - Enabling Policies, Institutions and Programmes, Issues and Challenges, 2006 (Second Edition).

8 These are the Ministry for of Environment, Energy and Mineral Resources, Forestry, Industry, Foreign Affairs, Home Affairs, Transportation, Agriculture and National Development Planning.

9 Forestry projects additionally require that a recommendation from the Ministry of Forestry be submitted.

10 Although the DNA sometimes states that it evaluates the “sustainability additionality” of a project, the term is actually meant to signify the contribution of the project to Indonesia’s sustainable development. The DNA does not, therefore, evaluate whether the project would have been implemented if the CDM had not existed.

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The process of DNA establishment and CDM promotion

South Africa’s DNA was created in late 2004. The

Dutch-funded non-governmental organisation South-

SouthNorth (SSN) assisted South Africa in setting

up necessary institutions for the country’s participa-

tion in the CDM, with support from the German

Technical Cooperation, the Danish International

Development Agency (DANIDA) and the Norwegian

Aid Agency (NORAD). Palmer Development Group

also played a signifi cant role in the establishment of

the DNA.

C D M i n s t i t u t i o n b u i l d i n g a n d d e f -

i n i t i o n o f a p p r o v a l c r i t e r i a

In the beginning of the process, it was intended that the National Department of Environment and Tourism (DEAT) – the national focal point for climate change and a long-term driver in the process of establishing the DNA – hosts the DNA. Supported by SSN, the department conducted an initial public stakeholder process on the establish-ment of the DNA. Consensus was not reached on the set-up of the DNA, particularly due to the considerable debate on the sustainability criteria. This could have reduced enthusiasm within DEAT in terms of proceeding with setting up the DNA, which was then offered to other ministries.

One of the issues that illustrate the diffi culties around the discussion on sustainability criteria was the question of how to deal with potential job losses in South Africa as a result of CDM projects. Representatives from domestic and international industry had argued that modernisation and ef-fi ciency improvements often lead to a reduction in employment and as such should not be deemed a negative project impact. Labour and NGO mem-bers contended, however – especially taking into account the country’s unemployment level – that it would be unfair for South African workers to lose their jobs in order to enable industrial countries to achieve their emission reduction targets. Along-side discussions centring on sustainability criteria, there was a long-standing debate within the gov-ernment as to which department should host the DNA.

While the issue of where the DNA should be located was being debated in government, an in-formal group of representatives from industry, civil society and the labour movement managed to come close to reaching consensus on a scheme for assessing the contribution of proposed projects to the sustainability objectives. SSN helped to facilitate these discussions. When the Department of Minerals and Energy (DME) was fi nally appoin- ted by the cabinet to host the DNA, it commis-sioned SSN and Palmer Development Group to jointly develop a draft regulation for the DNA, which was once again discussed with stakeholders.

S o u t h A f r i c a

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Practical experiences with CDM imple-mentation

South Africa’s fi rst CDM project – a low-income

housing energy project – was registered by the CDM

Executive Board in August 2005. This project is also

the fi rst project that has been registered using the Gold

Standard, and the fi rst CDM project in Africa. By

September 2006, 15 projects had been approved by

South Africa’s DNA and 18 PINs had been evaluated

as positive; one project was rejected because it did not

fulfi l the sustainability criteria. By the end of October

2006, four South African projects had been registered

by the CDM Executive Board, accounting for about

157.000 CERs per annum.

I n t e r n a t i o n a l p o s i t i o n o f t h e

c o u n t r y a n d b a r r i e r s f o r C D M

p r o j e c t d e v e l o p m e n t

According to Point Carbon, South Africa has man-aged to successfully promote itself as a relatively reliable location in which to spend money on carbon reduction schemes, contrary to the rest of

the continent (Point Carbon CDM & JI Monitor, 10 January 2006). However, in contrast to the fact that the country has long been seen as the most attractive CDM host in Africa, given its strong dependence on coal and its differentiated indus-trial sector which allows for many different project types to be developed, the CDM has not yet ‘taken off ’ as expected.

The South African DNA observes a decreasing but still considerable lack of awareness among potential CDM project developers with regard to the CDM in general and to project development. There are a number of legal barriers to municipalities being project developers (like the prohibition of contracts which exceed 3 years), which are currently be-ing addressed. Furthermore, it is unclear whether CERs will be subject to taxation; a study on the issue has been commissioned in cooperation with the DNA. According to the DNA, a number of potential project developers have declared that they would prefer to wait until this question has been clarifi ed. The DNA emphasises that the CDM still requires considerable awareness-raising activities. It has advocated an adaptation of national regula-tions currently impeding CDM projects and has engaged in the organisation of workshops and meetings of (potential) project developers. In this context, inviting more experienced project develop-ers to explain key diffi culties in setting up projects to an interested audience and how they can be overcome turned out to be helpful.

S o u t h A f r i c a

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SouthSouthNorth assumes that, currently, CDM projects are less attractive than other investment options and that in the absence of clear signals of a long-term carbon market this will prevail. An-other reason that is occasionally mentioned is the low electricity price level, which provides a low incentive for energy effi ciency projects.

Responsibilities, institutional structure and DNA decision making

The DNA was established as a directorate within

the DME. It consists of three people. The Direc-

tor General of the DME is vested with the ultimate

DNA authority. A Steering Committee for the DNA

representing ten ministries 11, acts as a surveying and

advisory capacity to the DNA. Financing for host

country approval comes from the government. In ad-

dition, a CDM Promotion Sub-Committee has been

set up. This committee meets at irregular intervals

and comprises representatives of different government

departments, potential project developers and NGOs.

The committee’s task is to support the DNA in its

promotional work.

T w o - s t e p a p p r o v a l p r o c e d u r e

The approval procedure comprises the following stages:

Project developers may submit a voluntary Project Identifi cation Note (PIN)

The DNA conducts an initial evaluation and answers within 30 working days

For the offi cial approval, project proponents should submit a PDD, justify why the sustainabil-ity criteria are expected to be fulfi lled, and explain who the projects’ benefi ciaries will be

When the project has completed the DOE vali-dation process, the DNA publishes the PDD on its website

Two to three people from the DNA directorate

in the DME evaluate the project and may ask for additional information; the result is transferred to the Committee

The Committee gives its recommendation

The DNA (ultimately the Director General of the DME) takes the fi nal decision on whether to

approve the project or not

Maximum duration of the approval: 45 working days

Project participants can appeal against the approval decision12

If there is disagreement between the Committee and the DNA as to whether a project should be ap-proved or not, the latter convenes a meeting where the contested questions can be discussed. The rea-sons for the DNA’s fi nal decision need to be com-municated to the project proponent in a transpar-ent manner. No fees are charged for host country approval. Project validation by the DOE can take place in parallel and does not have to be completed

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before the application for host country approval is submitted. However, it is necessary that the base-line and monitoring methodology used has already been approved by the CDM Executive Board at the moment of application. This is because the DNA wants to assure that there is a high probability that the project will be implemented if it is approved.

S u s t a i n a b i l i t y c r i t e r i a a n d t h e i r

a s s e s s m e n t

South Africa’s sustainability criteria are based on the National Environmental Management Act and comprise environmental, economic and social aspects. Environmental criteria concern the quality of the local environment, biodiversity, the usage of and impacts on the local community’s access to natural resources. Economic criteria regard the project’s impact on existing economic activity in the area, energy costs, foreign direct investment and the transfer and deployment of local technol-ogy and knowledge. Social criteria refer, on the one hand, to the project’s contribution to national, provincial or local development or sectoral objec-tives (such as the local provision of basic services or renewable energy targets); on the other hand, they concern employment, social equity and poverty alleviation.

Sustainability criteria are not assessed separately, but the DNA determines whether the project sup-ports sustainable development in the country on balance. A project needs to have a positive impact in at least one of the sustainability aspects and can be neutral in the other two; however, if it has a negative impact in one of the sustainability aspects, it is rejected. In some instances, the DNA fi nds it diffi cult to legally justify its decisions, given that the decision could be later questioned in court. Currently, there are plans to revise the sustain-ability criteria to address this issue and enhance the legal robustness of the DNA’s decisions; aside from this, no changes have been made to the host country approval framework since the DNA was brought into being.

South Africa will communicate the thresholds for the defi nition of afforestation and reforestation project activities to the UNFCCC by the end of 2006. They have already been fi xed in the process of a stakeholder and expert meeting held by the DNA.

11 National Department for Minerals and Energy, Environmental Affairs and Tourism, Water Affairs and Forestry, Foreign Affairs, Trade and Industry, Agriculture and Land Affairs, Transport, Science and Technology, Health, and the National Treasury.

12 First, they may lodge an appeal with the Minister of the DME, who will verify whether the DNA’s decision was taken in accordance with approval procedures; he or she will notify the project participants within 60 days. Next, project proponents can request that the appeal be heard before an administrative court.

S o u t h A f r i c a

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The process of DNA establishment and CDM promotion

Tunisia ratifi ed the Kyoto Protocol in 2003. The

DNA was formally established as an interministe-

rial committee, comprising members of six ministries,

in late 2004 upon the decision of the Minister for

the Environment and of Sustainable Development

(Ministère de l’Environnement et du Développement

Durable, MEDD). A secretariat – also called Na-

tional CDM Bureau – to support the committee was

established under the auspices of the General Director

of the Environment and the Quality of Life, which

is part of the MEDD.

The membership of the DNA committee was not yet

fi nally decided upon at that time and a DNA website

was not yet available. Recently, the committee was

extended to also include the Ministries of the Interior

and of Transport, public enterprises, the banking

sector and associations of the (craft) industry and com-

merce. The reason behind this decision was to raise the

awareness of the opportunities offered by the CDM

and to associate a large number of actors who could

support the implementation of the CDM in the

country.

Tunisia has adopted a strategy to accelerate the

development of CDM projects in sectors such as en-

ergy, waste management, industrial processes and

afforestation/reforestation. As part of this, a three-year

capacity building programme by the German Techni-

cal Cooperation was initiated in January 2006 in

Tunisia. The objective of this programme is to posi-

tion Tunisian project developers on the international

carbon market and to facilitate the establishment of

transparent and effi cient CDM project approval pro-

cedures.

D e v e l o p m e n t o f a s y s t e m f o r

p r o j e c t a p p r o v a l

Several capacity building workshops have already been held, which addressed the role of the DNA and which have resulted in a proposal for proce-dures and criteria for project approval. As a result of these activities, a new project approval system is close to being launched. The fact that the Kyoto Protocol came into force in 2005 and that over 30 promising projects were apparently ready for DNA application in Tunisia also pushed the debate on.

The fi rst workshops organised by the German Technical Cooperation for the members of the DNA focused on enhancing knowledge of the CDM, since some DNA members had not been involved in climate change or CDM issues before.

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It was also important to convey the idea that as a DNA member it is not enough to observe the dis-cussions and report the results to one’s own min-istry or organisation, but that active participation of each member is required. A team of a Tunisian and an international CDM expert moderated the workshops. A participatory approach was followed, rather than having the rules developed by external expertise. It was a new and interesting experience for some participants to be able to jointly discuss regulations, especially in an interdisciplinary team of representatives from different ministries and other stakeholders. Important input was provided by a member of the DNA in Morocco, who pre-sented the procedures and criteria adopted there and the experiences gained since then, and who was able to comment on the suggestions for Tunisia from a different perspective.

Whilst the CDM experts simultaneously provided expertise and moderated the discussion in the fi rst two workshops, it was decided that the two roles be separated for the third workshop, with the aim of increasing the decision-making capacity of the group. The approval of concrete CDM project proposals was tested as part of the workshop, using the criteria that had been developed up to then. The institutional arrangements, approval procedure and sustainability criteria which were developed during the workshops are expected to be offi cially approved in late 2006 and will be applied by the DNA thereafter.

C a p a c i t y b u i l d i n g t o p r o m o t e

C D M p r o j e c t s

As a further part of the German Technical Coop-eration project in Tunisia, four workshops were carried out to build capacity in the private sector. The workshops targeted the national waste man-agement agency (ANGeD), the national electric-ity and gas utility (STEG), a chemical enterprise (GCT) and the broader private and public industry as well as consulting fi rms. All workshops ad-dressed how to determine a baseline, prepare a PDD and the necessary documentation with re-gard to host country approval in accordance with the recently developed procedures and criteria. The workshop for STEG focused on wind and small hydro power projects, so that STEG can now examine the development of a number of CDM projects.

The capacity building workshop for GCT concen-trated on fuel switch and the destruction of N2O, while the workshop addressing the industry sector and consultants placed special emphasis on wind energy and combined heat and power generation. During the latter, it became clear that consulting fi rms represent important actors in respect of the promotion of the CDM in Tunisia. At the mo-ment it does not seem very probable that industry enterprises will start developing CDM projects on their own initiative. However, short and regular workshops with consulting fi rms should be con-

T u n i s i a

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templated in order to foster the interest of this group as well as its capacity to take the initiative. These workshops could provide an opportunity for discussing current projects, case studies and for exchanging experiences with regard to the realisa-tion of CDM projects in Tunisia. The activities of the German Technical Cooperation project also include support in the set-up of the DNA website, which is supposed to go online before the end of 2006.

Practical experiences with CDM imple-mentation

Since the establishment of the DNA in 2004, two letters of approval have been issued for two waste management projects; one of them – a landfi ll gas recovery and fl aring project for nine bundled landfi lls – was registered by the CDM Executive Board in October 2006. The PINs of another two projects were evaluated and received preliminary approval. However, these CDM project applica-tions were not subject to the procedures and crite-ria described below, since the latter were developed in spring 2006 and have yet to be offi cially adopted.

The evaluation of the use of the new rules will reveal whether there is additional need for institu-tional capacity building. However, raising aware-ness and increasing the knowledge of potential project developers with regard to CDM projects are indeed important tasks in supporting the implementation of the CDM in Tunisia. Larger companies like STEG or the GCT are currently building up their own expertise as regards the de-velopment of CDM projects, since they have per-sonnel with the necessary qualifi cations. Small and medium-sized enterprises tend to rely on consult-ing fi rms. Generally, the available methodologies are well suited to the portfolio of potential CDM projects in Tunisia. Suitable methodologies are not yet available for some project ideas which are being developed at the moment (solar heating of warm water for sanitary use and improved energy effi -ciency of street lighting).

However, a considerable barrier to the implementa-tion of energy projects is the lack of a guaranteed feed-in tariff for electricity producers who want to sell power to the national power company. A “task force” of the Ministry of the Industry and Small and Medium-Sized Enterprises (SMEs) is cur-rently working on this issue, in particular to foster electricity generation in combined heat and power plants. The electricity generation projects which are currently being investigated (combined heat and power and wind energy) are therefore designed to only cover the power needs of the project par-ticipants and do not rely on the sale of surplus electricity.

According to the representative of the German Technical Cooperation project in Tunisia, the most signifi cant potential lies in the sectors of energy (wind energy, energy effi ciency, combined heat and power generation and substitution of heavy fuel oil), waste and afforestation/reforestation. It is expected that mostly projects in the energy sector will be submitted in the near future due to CDM promotion activities, which the National Energy Management Agency (ANME) has been carrying out in recent years. Up to the end of 2006, about ten PINS are expected to be submitted; the PDD development for these projects still needs some time.

Responsibilities, institutional structure and DNA decision making

The Tunisian DNA secretariat is hosted by the MEDD and is represented by the General Direc-tor of the Environnment and the Quality of Life. The DNA committee, which is responsible for taking the fi nal decision on project approval, con-sists of 15 representatives of nine ministries13 and six other bodies14. The member institutions have one vote each; decisions are taken by the majority of the members attending the meeting. The com-mittee is headed by the Minister of the MEDD. This ministry also bears the expenses of the DNA.

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T u n i s i aT u n i s i a

As some DNA members from the private sector may also be CDM project proponents themselves, a suggestion was made during the workshops that the respective DNA member may take part in the evaluation and discussion of his or her project, but shall abstain from voting in such cases; this sug-gestion will probably be adopted during one of the next meetings.

According to the draft regulations, a project propo-nent has to submit a PIN (in French or Arabic) for an initial review. The initial review shall be com-pleted within 15 days. An English PDD is required for the fi nal project approval, accompanied by a PDD summary in French or Arabic, to comply with the period of approval, even when the com-mittee members carrying out the evaluation do not speak suffi cient English. Project proponents can verbally present their project to the DNA secre-tariat. If necessary, the DNA can request additional information. Every committee member evaluates the project and the secretariat calculates the overall score. The approval decision is to be taken within 45 days, no fees are levied. The DNA is supposed to ensure that stakeholders have been consulted by the project proponent; however, the DNA assumes that it is the task of the DOE to examine whether project proponents have appropriately considered any stakeholders’ comments.

Tunisia plans to use a detailed multi-criteria ap-proach, with four groups of criteria (economic, so-cial, environmental and strategic). Each group has a different weight: economic criteria are weighted at 28%, social at 22%, environmental at 29% and strategic ones at 21%. For each group, three to four equally weighted indicators are used to evaluate the fulfi lment of the criteria. Each indicator is to be assessed with values from zero (no contribution) to ten (strong contribution).

The economic criteria include, for example, an assessment of the project’s payback period or the impact on the national balance of payments. Social criteria evaluate the number and kind of jobs cre-

ated or the project’s impact on capacity building. Indicators of the environmental criteria focus on the amount of avoided greenhouse gas emissions and on the reduction of air, water or soil pollution. The strategic criteria concern the long-term impact of the project, e.g. regarding the dependency on energy imports, the technological position of the country and contribution to the development of international partnerships.

All of the members attending a DNA meeting will rate the project; the average is then calculated, taking into account the weighting factors. If the project scores at least 1.5 out of ten on average, then approval is granted. With this threshold be-ing close to the lowest possible ranking, it seems likely that all projects will receive DNA approval in practice.

Tunisia has not yet defi ned the thresholds for the defi nition of afforestation and reforestation project activities.

13 Ministry of Environment and Sustainable Development, Interior and Local Development, Finances, Industry and SMEs, Development and International Cooperation, Agriculture and Water Resources, Transports, Trade and Handicraft, External Affairs.

14 The Central Bank, the national electricity and gas company STEG, the National Energy Management Agency ANME, the Tunisian phosphate manufacturer Groupe Chimique, the Tunisian Union for Industry, Trade and Handicrafts and the Tunisian Union for Agriculture and Fishery.

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This section summarises the lessons learned from the

establishment of DNAs and the promotion of the

CDM in fi ve countries. Based on these experiences,

we illustrate advantages and disadvantages of different

approaches and provide practical recommendations

on how to establish an enabling framework for the

CDM in other countries.

The process of DNA establishment

Since the DNA is responsible for the host country approval of CDM projects, the establishment and proper functioning of the DNA is a key pre-requisite for participation in the CDM. In many host countries, the process of establishing a DNA has been complex and time-consuming. Whilst the modalities and procedures for the CDM were decided upon at the Seventh Conference of the Parties in Marrakech in 2001, only a third of the developing countries had notifi ed their DNA three years later. Although by September 2006, 88 out of 148 developing countries who ratifi ed the Kyoto Protocol had formally established their DNA, many of these DNAs are not operational. The lack of a DNA or the lack of clear approval procedures and sustainability criteria is still a major barrier to project development in a number of countries. In this regard, the establishment of DNAs in all developing countries will also enable more coun-tries to benefi t from CDM projects.

The following steps are necessary to establish a DNA and to make it operational:

An organisational unit in an existing or new institution or government agency needs to be des-ignated as the DNA and notifi ed to the UNFCCC secretariat. Staff has to be assigned to the DNA.

Procedures for the assessment and approval of proposed CDM projects need to be established and the responsibilities for project evaluation and fi nal decision-making need to be allocated.

Sustainability criteria for the approval of projects have to be set up.

The source of fi nancing for the DNA, e.g. through fees for project approval, needs to be clarifi ed.

In the following, we summarise lessons learned from putting the process of DNA establishment into action and undertaking these four steps.

H o w t o g e t t h e p r o c e s s o f e s t a b -

l i s h i n g a D N A s t a r t e d

At the very beginning of the process, it is impor-

tant to fi nd a reputable institution which already has knowledge of climate change and CDM issues at its disposal and is able and motivated to organise the process of establishing the DNA. This could be the UNFCCC focal point. But independent or-ganisations that cooperate with the UNFCCC fo-cal point are also well suited. An institution with a CDM leadership in the country or even dedicated individuals with good contacts to governmental au-

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thorities can substantially assist the establishment of the DNA and the promotion of the CDM.

Once an institution has been assigned to organ-ise the process, we recommend that a series of workshops be held where all relevant stakeholders are provided with information about the CDM and the role of the DNA. All aspects of DNA establishment in the country can be discussed in these workshops. We recommend that all relevant stakeholders, including governmental authorities, industry representatives and NGOs, be involved at an early stage of the process, in particular when the approval process and the sustainability criteria are being developed. The views of NGOs often turned out to be very helpful in keeping the sus-tainability goal on the agenda, when business in-terest risked dominating the debate. On the other hand, the consultation of industry representatives helped to achieve a simple approval system and sometimes accelerated decision-making.

For a successful and constructive process it is im-portant that all relevant stakeholders develop a common understanding of the CDM and the role of the DNA. This ensures that all governmental institutions have the same basis in discussions and understand the benefi ts and opportunities provided by the CDM. This proved to be very important as regards the active support and involvement of all relevant governmental institutions, which, in some cases, were not aware of the opportunities of the CDM or were initially not committed to supporting the process. Moreover, a common un-

derstanding of the tasks of the DNA is important because otherwise ministries may send representa-tives to the DNA committee who may be neither suffi ciently acquainted with the CDM nor be al-lowed to take decisions without consulting their ministry. This can considerably delay the approval of projects.

The recognition of the importance of the CDM not only in the institution responsible for climate change but in all ministries and by all persons in-volved in project approval has played an important role in the capacity building activities of the Ger-man Technical Cooperation in Tunisia. Collectively discussing and deciding on tasks, rules and criteria for project approval not only facilitated the estab-lishment of the project approval system but also ensured a common understanding.

To reach a common understanding, the benefi ts of the CDM and the role of the DNA could be explained in detail during the fi rst workshop, e.g. by providing examples of projects in the country and of the establishment of the DNA in another country. Furthermore, a time schedule for the set-up of the DNA and the issues of subsequent workshops could be agreed upon during this fi rst meeting.

Ensuing workshops could focus on which institu-tion should be designated as the DNA, how the approval procedure should work and what sustain-ability criteria should apply. Allowing someone without vested interests but who has knowledge of

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In the process of designating an institution, it is important to emphasise that hosting the DNA will not entail additional income for the nominat-ed ministry or person and also that the task is un-likely to lead to a signifi cant increase in the reputa-tion of the ministry. This is particularly important in the case of disagreements between ministries as to which one should host the DNA.

W h a t i s a g o o d i n s t i t u t i o n a l

s e t - u p f o r t h e D N A ?

Experiences gained up to now show that for coun-tries with a considerable CDM potential it makes sense for the tasks of the DNA to be divided be-tween a “DNA committee” and an “operational unit”:

The DNA committee is usually responsible for the fi nal decision-making as regards project ap-proval and other policy-related issues. It consists of representatives from ministries, and in some cases, non-governmental organisations, industry, the fi nancial sector and academic institutions.

The operational unit, often also referred to as secretariat, conducts day-to-day activities and serves the committee, for example by assessing proposed CDM projects. It consists of permanent staff. The resources of small countries with a lim-ited CDM potential may be overstretched if they want to set up a DNA secretariat.

The breakdown of tasks has turned out to be help-ful, since it ensures both a broad participation of relevant stakeholders in decision-making and that the necessary knowledge and institutional capacity is available, because of permanent staff in

change management and participatory instruments to moderate the workshops has proven useful.

Finally, testing the developed regulations and crite-ria for different project types has turned out to be helpful. Testing the approval procedure can demonstrate that some criteria may be diffi cult to apply or are ambiguous and should be revised or clarifi ed.

W h i c h i n s t i t u t i o n s h o u l d b e

d e s i g n a t e d a s t h e D N A ?

Predominantly, the DNA was established within the ministry responsible for climate change issues, usually the Ministry for Environment. This makes sense for most countries. However, this has not always been an easy and straightforward decision. In some cases, disagreements within governments about competencies regarding CDM or the ques-tion as to in which ministry the DNA administra-tion should be situated signifi cantly delayed the establishment of the DNA, either because several institutions wanted to host the DNA - or the op-posite.

In all of the countries anaylsed here, the DNA is a government department within an existing in-stitution, such as the national focal point for the UNFCCC. Experiences made by the countries under discussion indicate that it makes sense to designate an existing institution as the DNA and not to establish a new institution. Even in India, the country with most CDM projects worldwide, four to fi ve persons working within an existing institution are suffi cient for the tasks of the DNA to be accomplished.

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32

the support unit. In some cases, project evaluation is undertaken by a third institution, a technical team consisting of lower-ranking representatives of the ministries who are part of the DNA com-mittee. We recommend that the operational unit carries out the project evaluation. In this way, per-sonnel continuity and a good level of knowledge can be more easily guaranteed and no meetings of – potentially even high-ranking – technical team members need to be convened. Alternatively, an interdisciplinary technical team can be chosen, consisting of experts from different ministries.

Project evaluation may require signifi cant techni-cal understanding of the project, especially when it comes to assessing the sustainability impacts of the projects. This could lead to the DNA being overly dependent on the explanations of the project developers and being restricted in forming its own impressions. If the evaluation is carried out by the operational unit, external experts may be called in for diffi cult cases (whose independence from the project proponent has to be ensured), as is current-ly being discussed in South Africa. If a technical team is responsible for project evaluation, it is ad-visable to let its composition be adapted according to the type of project under evaluation. Usually, the fi nal decision is taken by the DNA committee, based on the assessment of the operational unit or technical team.

In defi ning the modalities of the DNA committee, the following issues are particularly important:

The level of ranking of committee members is a tricky issue which cannot be answered easily. The members should have the necessary rank to ensure political support and acceptance of the committee’s decisions. However, if their position is too high, they can lack the technical understand-ing needed and committee meetings can become prohibitively diffi cult to convene due to the limited availability of its members, which can result in de-layed project approval.

Depending on the tasks of the committee, its appropriate composition and size need to be defi ned. As a minimum, it is recommended that those ministries be engaged which are involved in climate change issues and are responsible for the most important CDM sectors, typically energy, industry and forestry. If regional or lo-cal authorities have considerable competences in the country, it should be examined whether they should be represented in the committee as well, e.g. on a rotational basis to ensure their coopera-tion with regard to CDM implementation. The representation of some governmental and non- governmental institutions is also recommended for the purposes of participation and transparency. However, as can be seen, the committee can be-come quite large, which increases the transaction costs of project approvals and can make it diffi cult for meetings to be arranged and serious discussions to be conducted. The nomination of the persons who should represent these institutions can also take considerable time. Also, the size of the coun-try and the expected number of CDM projects should play a role in considering the size of the committee. In many cases, less than ten members seem suffi cient.

Besides the regulatory function (project approval), many DNAs also have a promotional function. This can, for example, include promoting the country as a host of CDM projects for foreign investors, facilitating participation in the carbon market and supporting negotiations between local sellers and international buyers of CERs.

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In South Africa, considerable emphasis was placed in the beginning on separating the regulatory functions of the DNA from the promotion of the CDM. The objective was to prevent confl icts of interest when deciding on project approval. The DNA today states that over time it became clear, however, that this was a rather theoretical concern. Likewise, the DNA now engages in considerable promotion and awareness-raising activities and can benefi t from its existing contacts, e.g. with successful CDM project developers. While the institutional separation of the two tasks may have a positive side, the CDM promotion was consid-ered important and it was considered preferable that the DNA also promotes the CDM.

H o w s h o u l d p r o c e d u r e s f o r

p r o j e c t a p p r o v a l b e d e s i g n e d ?

In setting up the procedures for project approval, we recommend that particular attention be paid to the following aspects:

The procedures for project approval should be transparent and easy-to-understand. To reduce the risks of project development, it is important that project proponents can predict to a certain extent whether a project will be granted approval by the DNA or not. Therefore, the type of required docu-mentation and information to be presented when submitting an application to the DNA should be clearly communicated, e.g. on the website of the DNA. Project proponents will also greatly appre-ciate being informed in advance of the expected duration of the approval procedure.

It is advisable to let the validation of projects by the DOE be carried out in parallel with the evalu-

ation by the DNA. Compared to a consecutive approach, this saves time and enables the crediting period of the project to start earlier. The same ap-plies for baseline and monitoring methodologies: in case they have not been approved by the CDM Executive Board yet, this may be pursued in paral-lel with evaluation by the DNA.

We recommend giving project proponents the possibility of presenting a preliminary project sub-mission – usually in the form of a PIN – to reduce the initial transaction costs of project development. Especially in countries which have little experience with the CDM (and therefore a higher reluctance to the fi rst CDM projects being developed) it seems advisable to allow for a preliminary project evaluation at an early stage. Here, not only can defi ciencies with regard to the project’s perform-ance against the sustainability criteria be detected, but also the DNA can point out other issues with regard to project validation or registration which the proponent can then address early on. However, the presentation of a PIN should be voluntary for project proponents in order to avoid delays in project approval.

The following generic scheme for project ap-proval has been adopted by many countries and can be recommended generally: a PPD and addi-tional, country-specifi c documents have to be sub-mitted and are evaluated by the operational unit of the DNA or a technical team, whose recommen-dation is then passed on to the DNA committee for fi nal decision-making. The total approval pro-cedure takes no more than two to a maximum of three months in most countries.

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We advise countries to allow the project pro-ponents to verbally present their project to the operational unit or technical team undertaking the evaluation. In this way, open questions can be promptly addressed and potential misunderstand-ings be avoided. Such a meeting is also a good opportunity for inviting stakeholders who could take part in the meeting and make their comments heard.

Most of the countries provide for the right to appeal against the decision of the DNA, often, as a fi rst step, at the responsible ministry and, as a second step, at an administrative court. While this opportunity has not yet been used and may never be used in most countries, it contributes to the approval process being carried out in a correct and fair manner.

W h a t i s i m p o r t a n t w h e n d e f i n i n g

s u s t a i n a b i l i t y c r i t e r i a ?

The project’s contribution to the national sustain-able development criteria is the most important prerequisite for the project’s eligibility to the CDM. The DNA has to review the project and assess whether it fulfi ls the national sustainable development criteria, public participation require-ments or other legal requirements such as environ-mental impact assessments.

In some countries, criteria for sustainability have already been developed for other purposes than those concerning CDM. It is preferable to start with these criteria, which in many cases will have gathered some legitimacy and reached some de-gree of common understanding, than to develop new ones from scratch. In Indonesia, for example, sustainability criteria were based on the sectoral sustainability criteria of several ministries. Gener-ally, sustainability criteria ought to be defi ned by a large spectrum of stakeholders in order to ensure a broad acceptance of approved CDM projects in the country.

Generally, we recommend that sustainability crite-ria are categorised into environmental, social and economic aspects. The impact on the technological development of the country, which constitutes a separate criterion in some countries, can safely be subsumed under the economic criteria so as not to attach too much weight to economic aspects, com-pared to the social and environmental goals of sustainable development.

These criteria have to be operationalised using quantitative or qualitative indicators which allow for a clear evaluation of the submitted projects, without leaving too much room for personal in-terpretation. If criteria are formulated in an overly vague fashion without any indicators, the prob-ability of approval is less predictable for the project proponent and the outcome of the assessment is more likely to be coloured by the subjective inter-pretation of the person carrying out the evaluation. Moreover, this also constitutes a disadvantage for the DNA since arbitrary criteria involve the risk of decisions being appealed at a later stage. Taking into account the experiences made in the analysed countries, rather detailed criteria are clearly prefera-ble, as long as they cover all types of CDM projects which have to be evaluated.

A numerical scoring system with a minimum threshold that needs to be reached seems to be most appropriate to measure the project’s perform-ance against the sustainability criteria. However, it has to be ensured that the minimum threshold is high enough to prevent projects with a low sustain-

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ability contribution being approved. It is also ad-visable that the decisions are justifi ed, in particular in the case of negative decisions. It seems useful both for project proponents and for the DNA that proponents be required to elaborate upon the project’s contribution to the sustainability crite-ria in the national DNA’s application form with regard to every indicator. On the one hand, this encourages proponents to carry out an evaluation of the project’s performance themselves against the sustainability criteria; on the other hand the evalu-ation by the DNA is facilitated.

H o w s h o u l d p r o j e c t a p p r o v a l b e

f i n a n c e d ?

Financing of the DNA needs to be constantly en-sured to provide for a stable host country approval system. While it may be costly and not an overrid-ing priority in a developing country to defray the DNA’s expenses, none of the analysed countries – with the exception of Ghana - has decided to charge project developers for host country approv-al. In several countries, this idea was contemplated but abandoned for the time being so as not to create any additional transaction costs in the early market development process or due to the inability of earmarking revenues from fees for the fi nancing of the DNA.

CDM promotion

Several types of capacity building activities canbe envisaged for the promotion of project devel-opment. Which types of activities are most effec-tive, depends considerably on the extent to which CDM implementation has advanced in a country.

At the very beginning, it is recommended that the sectors be identifi ed which have a large mitiga-tion potential and are especially promising for the CDM in the country, for example, because of

their importance as regards national sustainability objectives. This could also include the identifi ca-tion of single projects or project types with a high replication potential. With limited resources, capacity building efforts should focus on these sec-tors. In Indonesia, South Africa and India, National Strategy Studies have been carried outfor this purpose.

Once promising sectors and project types are iden-tifi ed, the focus of capacity building often turns to the establishment of the DNA and the project approval system, since PDDs cannot be submitted to the Executive Board for registration without formal host country approval. Nevertheless, it is advisable that raising awareness on the opportuni-ties of the CDM already be started in parallel with the establishment of the DNA in order to show potential project developers in the country that ‘CDM is real’ and that it can deliver tangible revenues. The existence of a promising pipeline of projects within the country can constitute a strong incentive for a timely set-up of the DNA and has, for instance, sped up the process in Tuni-sia. The initial expectation that project proposals would largely be submitted as a matter of course was not fulfi lled.

Once the establishment of the institutional frame-work in the country is underway and key CDM sectors have been identifi ed, the focus of CDM promotion activities can turn to supporting the identifi cation of concrete projects and facilitating the development of project proposals in very prac-tical terms. Training activities specifi cally designed for project developers and CDM consultants – as conducted in India, Indonesia, Ghana and Tunisia – can signifi cantly increase the in-country capac-ity for project development and thus help decrease dependence on expertise from industrial countries and reduce transaction costs. At these capacity building workshops, the following activities are regarded as particularly helpful:

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PDDs are widely read and used as models for the development of other PDDs.

Several countries, including Indonesia, have men-tioned diffi culties in the development of small-scale projects, mainly due to their comparatively higher transaction costs. This barrier may be tackled by either bundling several projects in one single PDD or by establishing “programs of activities” where a program manager undertakes emission reductions in multiple small installations or households. In these cases, only the manager of the CDM pro-gram needs to be fully aware of all CDM require-ments and the small installations or households can benefi t from the CDM program through fi nancial or other benefi ts. Several methodologies for pro-grams have been submitted to the CDM Executive Board recently, including two demand-side energy effi ciency improvements in Ghana. Such method-ologies could help to broaden the sectoral scope of CDM projects.

In larger countries, another important area for capacity building activities is assistance in the col-lection and continuous updating of data for base-line determination in specifi c sectors, such as the development of grid electricity emission factors.

Theoretically, the set-up of in-country DOEs could reduce validation and certifi cation costs. However, it may be diffi cult for new DOEs to achieve a sig-nifi cant market share as currently just three DOEs reside over 75% of the market.

A thorough explanation of the basic principles of the CDM, including the concepts of baseline identifi cation, additionality, project boundaries, leakage, etc.

An explanation of the CDM market and the fi nancial benefi ts of the CDM.

Presentation of all steps that are necessary to develop a CDM project in very practical terms, including the location, where all relevant informa-tion can be found.

Discussion of project ideas of the workshop participants with a view to identify the emission reduction potential, methodological challenges and to assess whether a project idea appears to be feasi-ble or not.

Reporting on experiences from project partici-pants on projects that have already been registered.

Workshops focusing on specifi c sectors can help to explain the relevant baseline and monitoring methodologies and address specifi c questions and issues.

Several DNAs publish submitted PDDs on their websites for public perusal. While the publication was initially intended to invite comments from public stakeholders, the number of submitted com-ments has remained relatively low. However, the capacity building function of publishing PDDs cannot be underestimated. The South African DNA, for instance, has noticed that the published

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G h a n a

Step one: threshold criteria (only if the projects scores no for every question, the assessment shall proceed to step two)

Does the proposed CDM Project result in signifi cant increased environmental damage/degradation?

Does the proposed CDM Project result in signifi cant loss of employment or livelihoods?

Does the proposed CDM Project signifi cantly harm the economy of the country?

Step two: general criteria (criteria are assessed on

balance)

E c o n o m i c

Impact on economic growth and stability (e.g. foreign exchange requirements)

Impact on existing economic activity in the area

Impact on the cost of energy at the national level or to local benefi ciaries

Impact on leveraging foreign direct investment

Positive or negative implications for the transfer of technology to Ghana

Demonstration and replication potential

Alignment with local and national developmental objectives, including sectoral priorities and programmes of the Government of Ghana (e.g. renewable energy targets)

Impact on the provision of, or access to basic services to the area

S o c i a l

Impact on employment levels and local skills development (e.g. number of jobs created/lost, the duration of time employed etc.)?

Impact on community social structures, social amenities and cultural heritage

Contribution to the development of previously underdeveloped areas or specially designated development nodes

E n v i r o n m e n t a l

Does the Project conform to the provisions of the EPA Act 1994, Act 490 and its subsidiary legislations?

Are disturbances of ecosystems and loss of biological diversity avoided or minimised and remedied?Are pollution and degradation of the environment avoided or minimised and remedied?

Are disturbances of landscapes and sites that constitute the nation‘s cultural heritage avoided or minimised and remedied?

A n n e x I Sustainability Criteria in Detail

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Is waste avoided, minimised and reused or recycled where possible or otherwise disposed of in a responsible manner?

Does the development, use and exploitation of renewable resources and their ecosystems jeopardize their integrity?

Are negative impacts on the environment and on people‘s environmental rights anticipated and prevented or minimised and remedied (incl. potential for dislocation or relocation of riparian communities and efforts to mitigate)?

I n d i c a t o r s 1

Impact on air quality

Impact on water pollution and disposal of solid waste

Other positive or negative environmental impacts (with regard to noise, safety, visual impacts or traffi c)

Impact on effi cient and sustainable local use of water, minerals or other non-renewable natural resources

Impact on local or regional biodiversity

I n d i a

S o c i a l

Alleviation of poverty by

Generating additional employment

Removal of social disparities

Contribution to provision of basic amenities to the people

E c o n o m i c

Additional investment consistent with the needs of the people

E n v i r o n m e n t a l

Impact of the project activity on resource sustainability and resource degradation

Bio-diversity friendliness

Impact on human health

Reduction of levels of pollution in general

T e c h n o l o g i c a l

Development, deployment, diffusion and/or transfer of environmentally safe and sound technologies

I n d o n e s i a

E n v i r o n m e n t

Natural resource conservation or diversifi cation

Conservation of local ecological functions

Compliance with national, as well as local, environmental standards (not causing air, water and/or soil pollution)

Maintenance of genetic, species, and ecosystem biodiversity, no genetic pollution

Compliance with existing land use planning

Local community health and safety

Prevention of health risks

1 It is unclear whether this set of indicators constitutes an operationalisation of the environmental criteria.

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Compliance with occupational health and safety regulation

Set-up of a documented procedure of actions to be taken to prevent and manage possible accidents

E c o n o m y

Local community welfare

Preservation of the local community‘s income

Measures to overcome the possible impact of lowered income of community members

Preservation of local public services

Agreement among confl icting parties on how to solve employment questions

S o c i a l

Participation of the local community in the project

Consultation of the local community

Comments and complaints from local communities are taken into consideration and responded to

Social integrity of the local community

Avoidance of confl icts among local communities

T e c h n o l o g y

Technology transfer

Avoidance of dependence on foreign parties in knowledge and appliance operation (know-how transfer)

Avoidance of experimental or obsolete technologies

Enhancing the capacity and utilisation of local technology

S o u t h A f r i c a

E n v i r o n m e n t

Local environmental quality

Air quality

Water pollution

Generation or disposal of solid waste

Others, like noise, traffi c, visual impacts, safety

Usage of natural resources

Local community‘s access to natural resources

Sustainable of use of water, minerals or other non renewable natural resources

Effi ciency of resource utilisation

Biodiversity and ecosystems

Changes in local or regional biodiversity

E c o n o m i c

Economic impacts

Impact on foreign exchange requirements

Impact on existing economic activity in the area

Impact on the energy costs

Impact on foreign direct investment

Technology Transfer

Local skills development

Demonstration and replication potential

S o c i a l

National, provincial and local development priorities

Conformity with national and provincial objectives

Conformity with local objectives regarding the provision of or access to basic services to the area

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Relocation of communities

Contribution to sectoral objectives, like renewable energy targets

Social equity and poverty alleviation

Impact on employment level

Impact on social structures at the local community

Impact on social heritage

Impact on social amenities to the community

Contribution to the development of previously underdeveloped areas or specially designated ‚development nodes‘

C r o s s - c u t t i n g

Reasonable and fair distribution of project benefi ts

T u n i s i a

Data in brackets represent the weighted contribution of the criteria to the overall sustainability score or the weighted contribution of the indicator to the

fulfi lment of the individual criteria respectively.

E c o n o m i c c r i t e r i a ( 2 8 % )

Payback period (22%)

Economic productivity of the project (24%)

Net currency import (30%)

Attraction of foreign direct investment, reduction of state subventions (24%)

S o c i a l c r i t e r i a ( 2 2 % )

Number and quality of employments created locally (33%)

Amelioration of national capacity (18%)

Improvement of the quality of life of local population (28%)

Consultation and participation of local communities (21%)

E n v i r o n m e n t a l c r i t e r i a ( 2 9 % )

Greenhouse gas emissions avoided (31%)

Contribution to the reduction of atmospheric pollution (23%)

Contribution to the reduction of water and soil pollution (23%)

Contribution to the sustainable use of natural resources (23%)

S t r a t e g i c c r i t e r i a ( 2 1 % )

Contribution to the reduction of risks from energetic dependency (45%)

Contribution to the technological positioning of the country (26%)

Contribution to the development of international partnerships (29%)

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G h a n a

Environmental Protection Agency, Ministry of Envi-ronment, Science & Technology

91 Starlets RoadP. O. Box M326Accra

Homepage: http://www.epa.gov.gh/climate/CDM Email: Mr. William Kojo Agyemang-Bonsu ([email protected]); Mr. Jonathan A. Allotey

([email protected])

I n d i a

National Clean Development Mechanism (CDM) Authority

Member SecretaryMinistry of Environment and Forests115, Paryavaran BhawanCGO ComplexLodhi RoadNew Delhi

Homepage: http://www.cdmindia.nic.inhttp://www.moef.nic.in Email: R. K. Sethi ([email protected])

I n d o n e s i a

National Commission on CDM (KOMNAS MPB)

Gedung A Lt.6, JI. DI. Panjaitan Kav 42, Kebon NanasJakarta 13410Homepage: http://dna-cdm.menlh.go.id/en Email: Ms. Masnellyarti Hilman ([email protected])

S o u t h A f r i c a

South AfricaDepartment of Minerals and Energy

Private Bag X 59Pretoria 0001

Homepage: http://www.dme.gov.za/dna/index.stm Email: Advocate Sandile Nogxina

([email protected])

T u n i s i a

Ministère de l‘Environnement et du Développement Durable/Direction Générale de l‘Environnement et de la Qualité de la Vie

Centre Urbain Nord - Immeuble ICF 1080 TunisTunisie

Homepage not operating yetEmail: Le Directeur Général de l‘Environnement et

de la Qualité de la Vie ([email protected])

A n n e x I I Contact Details of the Designated National Authorities

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Clean Development Mechanism

Certifi ed Emission Reductions

South African national Department of Minerals and Energy

Designated National Authority

Designated Operational Entity

Executive Board

Environmental Impact Assessment

Ghanaian Environmental Protection Agency

Emissions Trading

Indo-German Energy Programme

Joint Implementation

Tunisian Ministry of Environment and of Sustainable Development

Ghanaian Ministry of Environment and Science

Indian Ministry of Environment and Forest

Megawatt

Indian National CDM Authority

Indonesian National Commission for CDM

National Strategy Study

Offi cial Development Assistance

Project Design Document

Public Private Partnerschip

Project Idea Note

Small and Medium-Sized Eterprises

SouthSouthNorth

United Nations Framework Convention on Climate Change

CDM

CERs

DME

DNA

DOE

EB

EIA

EPA

ET

IGEN

JI

MEDD

MES

MoEF

MW

NCDMA

NCCDM

NSS

ODA

PDD

PPP

PIN

SME

SSN

UNFCCC

Abbreviations

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Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH

- German Technical Cooperation -

Dag-Hammarskjöld-Weg 1-565760 Eschborn/GermanyT +49 61 96 79-0F +49 61 96 79-11 15E [email protected] www.gtz.de